To facilitate the advancement of innovation in the environmental field, it would be beneficial to consider a more substantial investment in R&D funds. However, the rationale behind firms’ investment decisions in the environmental sector remains unclear. This study aims to identify the factors that influence the decision to increase investment in environmental research expenditures. To this end, an empirical analysis was conducted to ascertain the factors influencing environmental research spending. The findings were based on panel data for 22 manufacturing sectors from 2008 to 2023 provided by Japan’s Ministry of Internal Affairs and Communications. The Bank of Japan’s Tankan Diffusion Index is included in our panel data, which allows the study to explore whether managers’ assessment of the economy might influence environmental research spending. The analysis revealed that increasing external research funding and self-funded research spending lead to higher environmental research spending. Furthermore, the study demonstrated that an increase in the number of female researchers is associated with an increase in environmental research expenditures.